I received a lot of advice and help when starting my first company, so now I like to return the favor and help others get their companies off the ground. To do that, I’ve met with a lot of people over the years starting a company for the first time.
People make a lot of mistakes then they start businesses – it’s expected, but these three tips will hopefully keep you from making some of the fatal mistakes I see a lot when people start new businesses.
Lack of Competition isn’t Always a Good Thing
Starting a company in a sector with too much entrenched competition can be difficult but starting in one with very little competition can be worse.
If an industry has a lot of competing businesses it’s a sign that the industry is profitable. If the industry you’re targeting doesn’t have many, you have to ask yourself why.
Is your product or service so unique that noone has thought of it before, or more likely, is it just not a profitable enough endeavor.
It’s much easier to disrupt an industry than create a new one.
The easiest businesses to grow successfully are those that disrupt an existing one. Netflix toppling Blockbuster, Uber and taxi’s, light bulbs and candles.
These companies or ideas already had a captive market that they could sell to. People have a need that those products or services were fulfilling, so once something better came along that filled that same need, it was an easy decision to switch.
With products and industries that are brand new, you have to educate consumers as to why they want your product, create your own marketing and supply channels, and then hope there is a big enough market to make it profitable.
The first goal of any business is information, not profit
Profit and revenue are king in business, but not when you first start a company.
Businesses are built on assumptions to many questions:
- Will someone buy this?
- Who is the type of person who will buy this?
- How do I reach that type of person to get them to buy it?
- What price are they willing to pay for it?
- How long will it take me to make it?
- How many people do I need to make this company work?
- What should I pay those people?
The first goal of any business is to find real world answers to see if their assumptions are true, not to make money.
Assumptions can only take you so far, and the longer you go without getting real information that your assumptions are true can bleed a business dry of it’s limited capital.
Any business should be meeting with it’s potential customers along the way to make sure they are building something they actually want, but if they haven’t, there are still plenty of ways to test the market to see if they want the product or service you want to provide even before you’ve built it.
Once you get the information you need, the blueprint to success becomes much easier to follow.
Are you starting a new business and need some help getting on the right track? I love helping new entrepreneurs follow their passion. Shoot me an email and let me know how I can help.